Fintech
What Generation Z and Millennials Expect: Here’s How to Give It to Them
With 43% of Generation Z and Millennials planning to increase credit card spending, financial services providers have a clear incentive to learn the changing preferences of this increasingly influential group. Episode six understands them and has the technology to deliver value, responsible for sales excellence Kallan Hogan She said.
Hogan is uniquely positioned to help Episode Six customers adapt to this new reality. For more than two decades, primarily at American Express and Mastercard, he worked in card design, launch and issuing, helping issuers innovate.
Now is the time to innovate; Millennials and Generation Z will make up 70% of the workforce by 2030. Companies with older customers like Amex need to quickly rebuild their customer base.
Generation Z and millennials are changing the definition of primacy
How are Millennials and Generation Z different? They grew up digitally and don’t know anything else. According to some research, they would rather have a root canal treated than visit a branch. A poor digital experience is simply a failure.
They changed the concept of primacy. Hogan said Millennials and Generation Z compartmentalize their spending with different accounts for different purposes. That has spurred a surge in single-use virtual cards, which younger groups use to try new products and subscriptions (those cards protect consumers from automatic renewals). Compartmentalization also helps those with second jobs keep track of income and expenses.
Millennials and Generation Z invest more than any other generation. With inflation and home prices, many see investing as the only way forward.
They present security challenges. While older groups tolerate one-time passwords and other strategies, these groups do not. They hate friction and prefer biometrics. This could push a movement towards a combination of tokenization and biometrics.
Younger consumers are happy to support environmentally conscious initiatives, especially when they are convenient and offer something in return. Maybe it’s a green ETF. They also like rewards and are open to new types.
Hogan said Episode Six helps customers adapt to the needs of Millennials and Generation Z by providing single-code, cloud-native solutions that complement their cores. This allows them to offer more products in the pursuit of supremacy. Virtual accounts? Single-use virtual cards? Rewards messages? Customers can choose the options they need.
The return of innovation?
Traditional institutions want to innovate, but it’s difficult, Hogan explained. However, he senses a change.
“I see an increase in fintech and banks wanting to go back to the 1990s to launch and iterate and test and get it right,” Hogan said. “Legacy providers have to look for new partners and don’t want to eliminate the core team because that would be too distracting; it takes too much time.
“When they say that banks are not innovative, it is not true. They’re in this negative cycle of innovation where they have quarterly releases; 90% is compliance.”
He added that this leaves little time and energy to take the steps needed to innovate. This means there is no need for testing, adjustments and repetitions. Politics and tiredness favor safer bets.
It’s through compliance
How does Episode Six steer the conversation towards innovation? Hogan said that’s by simplifying compliance. Show how 16 AWS Centers eliminate on-site outages that reduce productivity and responsiveness. Describe how the single code base supports auditing and monitoring, tools that legacy technology doesn’t have. Prioritizing compliance reduces operational expenses and gives companies time to test, iterate and deliver innovative products.
“The strength, and where we have been very successful, is because we are registries, because we are processing issuers, and that is very complicated. Many payment aspects are stuck there. Because we are CMS, and because we are a sidecar to their existing core, they can be more compliant. They can have lower operating costs and innovate.”
“If you use that legacy supplier and you’re not the largest supplier in the world, you’re cross-subsidizing your competitor because they get the same technology with better engineers at a lower price,” Hogan warned. “The only way to compete is on branding and marketing spend because your product will be, at best, the same or, in reality, the same at a high cost. This is the fatal cycle of innovation.”
Financial service providers can have it all. They can be compliant, reduce operating costs, innovate, and meet the needs of Gen Z, millennials, and everyone in between.
“This whole big bang thing has to stop because nobody gets a product right the first time,” Hogan concluded.
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Tony is a long-time contributor in the fintech and alt-fi spaces. Twice named journalist of the year at LendIt e winner in 2018, Tony has written more than 2,000 original articles on blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT’s Unchained, a blockchain expo in Hong Kong. Email Tony here.